Crude Awakening: Rising Oil Prices Complicate Fed’s Decisions Later This Year

Talking about the farm bill: Comments from Stabenow, Chambliss, Thompson and Vilsack

Today’s Digital Newspaper

MARKET FOCUS

USDA daily export sale: 120,000 MT soybeans to unknown destinations, 2023-2024
Brent crude futures on track to rise by 26% this quarter
Gasoline prices rise to national average of $3.88 a gallon from $3.68 one year ago
Diesel prices have soared even faster, especially in Europe
Ag markets today
U.S. dollar staging a comeback
Pimco: Markets underestimating risk of another rate hike before year-end
Sevens Report: Three areas where Fed could provide a hawkish or dovish surprise
U.K.'s annual inflation rate unexpectedly dips to 6.7% in August
Amazon to hire 250,000 workers and boost employee pay ahead of holiday season
U.S. oil stockpiles fell by 5.25 million barrels last week
U.S. home insurance costs may be headed even higher
United Auto Workers' threat of prolonged strikes could trigger 10% surge in car price
Egypt turns to France and Bulgaria for wheat supply after Moscow objects to pricing
Ag trade update
NWS weather outlook
Pro Farmer First Thing Today items

CONTINUING RESOLUTION (CR) and POSSIBLE GOV’T SHUTDOWN

House fails to advance Pentagon spending bill due to five renegade Republicans
White House warns of potential consequences as gov’t shutdown looms

RUSSIA & UKRAINE

Polish president promises to safeguard grain market amid rising Ukraine tensions
Ukraine charts new grain export route amid Russian naval threat and trade disputes
Russia raises grain export forecast
Zelenskyy delivers powerful speech at U.N. General Assembly

POLICY

Stabenow and former Senator Chambliss discuss key farm bill issues
Thompson: Awaiting CBO scores on farm bill programs
Vilsack emphasizes climate-smart focus for farm bill's conservation funds

CHINA

China leaves benchmark lending rates unchanged

TRADE POLICY

China appeals WTO decision rejecting tariffs on $2.4 billion of U.S. products

ENERGY & CLIMATE CHANGE

EPA urged to strengthen oversight of RFS program following auditor's report
Yellen advocates climate guidelines for banks at U.N. General Assembly

OTHER ITEMS OF NOTE

European Commission proposes 10-year renewal of glyphosate approval
Today’s calendar of events

MARKET FOCUS

Equities today: Asian and European stocks were mixed overnight. U.S. Dow opened around 90 points higher. In Asia, Japan -0.7%. Hong Kong -0.6%. China -0.5%. India -1.2%. In Europe, at midday, London +0.8%. Paris +0.4%. Frankfurt +0.6%.

U.S. equities yesterday: All three major indices finished with modest declines ahead of Wednesday's Fed meeting conclusion. The Dow was down 106.57 points, 0.31%, at 34,517.73. The Nasdaq declined 32.05 points, 0.23%, at 13,678.19. The S&P 500 lost 9.58 points, 0.22%, at 4,443.95.

Brent crude futures, the international energy benchmark, are on track to rise by 26% this quarter having climbed to about $95 a barrel. On Tuesday, they added 0.4%, putting prices on track for a four-day streak of gains and rises in 13 of the past 16 trading days. West Texas Intermediate futures, the U.S. benchmark, have jumped 29% this quarter to just over $91 a barrel.

Gasoline prices have risen to a national average of $3.88 a gallon in the U.S. from $3.68 one year ago, AAA said. Gas costs jumped 11% from July to August, driving more than half of overall inflation for the month.

Meanwhile, the price of diesel, which often fuels trucks and factories, has soared even faster, especially in Europe. In the U.S., the average price is $4.58. Data from Britain this morning showed inflation fell faster than expected last month, but rising fuel prices were an outlier to that trend.

Agriculture markets yesterday:

Corn: December corn futures rose 4 3/4 cents to $4.76 1/4 and near the session high. Prices hit a two-year low early on.
Soy complex: November soybeans fell 1 1/4 cents to $13.15 1/2, marking a mid-range close, while December meal rose $1.30 to $389.20. December soyoil fell 65 points to 60.29 cents.
Wheat: December SRW wheat futures fell 7 1/4 cents to $5.84 and nearer the session low. December HRW wheat closed down 4 cents at $7. 31 and near mid-range. December spring wheat futures rose 2 1/4 cents to $7.79 3/4.
Cotton: December cotton rose 52 points to 87.52 cents, notching a close above the 10- and 20-day moving averages.
Cattle: October live cattle futures fell 65 cents today before closing at $185.675. October feeder futures led the complex lower, falling $1.60 to $259.35.
Hogs: The nearby contracts led hog futures higher Tuesday, with October surging $1.60 to $84.85.

Ag markets today: Corn, soybeans and wheat posted mild corrective gains during a lightly traded overnight session. As of 7:30 a.m. ET, corn futures were trading fractionally higher, soybeans were around a penny higher and wheat futures were 6 to 8 cents higher. Front-month crude oil futures were around 50 cents lower, and the U.S. dollar index was 175 points lower.

Key reversals in cattle futures. Live cattle futures posted contract highs on Tuesday before closing below the previous day’s lows, marking key reversals on the daily charts. While that could signal a short-term top, it would take active followthrough selling and a weekly low-range close to be an early warning sign of a major top. Supply-side fundamentals are still fully bullish, but we have some demand concerns.

Cash hogs weaken, pork cutout firms. The CME lean hog index is down 23 cents, marking the third straight daily decline. Still, the market has shown signs of stabilizing over the past couple of weeks. The pork cutout value firmed 17 cents on Tuesday.

Quotes of note:

The U.S. dollar is staging a comeback, surging in value despite earlier predictions of a decline, while economic growth in China and Europe faces challenges. This reversal in the dollar's fortunes began in July, defying expectations of a retreat that were based on the belief that the Federal Reserve's interest rate hikes were approaching their conclusion. The dollar's resurgence is now reminiscent of its strong performance in 2022, a year marked by economic disruptions as it drove up commodity prices in global markets and increased the burden of foreign debts for many. Mark Nash of Jupiter Asset Management characterized the dollar's current strength as formidable, noting that he had abandoned his pessimistic stance on the dollar earlier in the year.
Pimco money manager Geraldine Sundstrom, says markets are underestimating the risk of another rate hike before year-end. “Higher for longer” is likely the mantra for US rates as “inflation will remain a little bit stickier than expected,” Sundstrom said.
Decarbonization. “Many companies are learning that the beginning of decarbonization is easy. The moment you really need to go into true transformation, the work becomes quite difficult.” — Günther Thallinger, an Allianz board member who chairs a U.N. climate-focused investor group.

— The Sevens Report, looking at today’s FOMC decision, says there are three areas where the Fed could provide a hawkish or dovish surprise: Rate hikes, forward guidance and the “dots.” Of the three, “the most likely to surprise markets are the dots, specifically the 2024 dots. How each of these variables work out will determine if the FOMC meets expectations, is hawkish or is dovish.”

— U.K.'s annual inflation rate unexpectedly dips to 6.7% in August, contrary to predictions of 7% increase. In a surprising turn of events, the annual inflation rate in the United Kingdom eased to 6.7% for the month of August, a slight decrease from July's 6.8%. Economists had previously anticipated a rise to 7%. Additionally, the core inflation rate, which excludes the prices of energy, food, alcohol, and tobacco, also experienced a decline. Chancellor Jeremy Hunt hailed the figures as evidence that the government's inflation response was effectively achieving its goals, describing it as "plain and simple."

— Amazon plans to hire 250,000 workers and boost employee pay ahead of holiday season. In preparation for the upcoming holiday season, Amazon announced its intention to hire 250,000 workers for a range of positions, including full-time, part-time, and seasonal roles in fulfillment centers and transportation operations across the United States. Additionally, the e-commerce giant is committing $1.3 billion this year to increase the wages of customer fulfillment and transportation employees, marking a substantial increase of more than 50% over the past five years.

Despite facing macroeconomic challenges such as inflation, the resumption of student loan repayments, and higher gas prices, U.S. retail sales are expected to remain resilient during the holiday season. Deloitte anticipates growth in holiday sales, albeit at a slower rate compared to the previous year, with estimates ranging from 3.5% to 4.6%, compared to last year's 7.6% growth.

Plans in the retail sector aren’t nearly as cheerful. Big-box merchant Target said it plans to add 100,000 seasonal workers this year, in line with last year’s hiring, including in-store and supply-chain staffers. Macy’s is trimming its seasonal hiring 7% compared to last year, to 38,000 workers. The U.S. Postal Service said it is bringing on just 10,000 workers after earlier hiring initiatives.

Market perspectives:

— Outside markets: The U.S. dollar index was weaker. with the yen and euro both firmer against the U.S. currency. The yield on the 10-year U.S. Treasury note was slightly weaker, trading around 4.34%, with a mixed tone in global government bond yields. Crude oil futures were under pressure ahead of U.S. gov’t inventory data, with U.S. crude around $90.40 per barrel and Brent around $93.60 per barrel. Gold and silver were slightly, with gold around $1,954 per troy ounce and silver around $23.59 per troy ounce.

— U.S. oil stockpiles fell by 5.25 million barrels last week, the API is said to have reported. That would bring holdings to the lowest in more than nine months if confirmed by the EIA today. Meanwhile, Goldman Sachs today raised its price target for Brent crude to $100, joining a growing club that predicts triple-digit oil heading into the winter.

— U.S. home insurance costs may be headed even higher. Nonprofit First Street Foundation estimates that 39 million homes are insured at artificially suppressed prices compared with the risk they face from hurricanes, wildfires and floods.

— United Auto Workers' threat of prolonged strikes could trigger 10% surge in car prices. Automobile prices may see a significant surge of up to 10% or more as the United Auto Workers (UAW) union threatens further walkouts, according to experts. This ongoing labor dispute is also posing substantial financial risks to major automakers, with GM and Ford facing potential losses of as much as $125 million per week. Rob Handfield, a business professor at North Carolina State University, predicts that if the strike persists for a month or longer, it could result in roughly a 10% increase in vehicle prices. The extent of price hikes would vary depending on the specific make and model of vehicles. Handfield told the New York Post that if the strike continues for an extended period, it could impact the inventory levels of car dealerships. As dealerships begin to have fewer cars available, they may raise prices to compensate for the reduced supply, potentially leading to price increases of up to 10%.

— Egypt turns to France and Bulgaria for wheat supply after Moscow objects to pricing. Egypt has chosen to diversify its wheat sources, opting for France and Bulgaria, as Moscow has disrupted the supply of Russian grain, according to Bloomberg (link). The objection from Moscow stems from pricing concerns related to a substantial wheat deal. This marks the second instance in recent months where Egypt's state-run procurement of Russian wheat has faced complications, as Moscow authorities attempt to enforce an unofficial price floor.

Background. In early September, Egypt's General Authority for Supply Commodities had initially agreed to purchase 480,000 tons of Russian wheat through direct negotiations, as confirmed by Supply Minister Ali El-Mosilhy. This deal was secured at a price of $270 per ton, including freight, which was below the unofficial price floor that Russian officials were attempting to establish at that time. Shortly thereafter, Egypt announced that crop trader Solaris would have the option to supply grain from any source.

Russia's grain ports are grappling with excess supply following two consecutive bumper harvests, establishing the country as the leading shipper and price-setter in the global market. Nonetheless, the surplus in supply has led to local price fluctuations, prompting officials to enforce a price floor to stabilize the market, although the application of this limit has been inconsistent.

— Ag trade update: South Korea purchased 50,000 MT of Australian milling wheat and tendered to buy 50,000 MT of U.S. milling wheat. Egypt tendered to buy an unspecified amount of wheat from multiple origins.

— USDA daily export sale: 120,000 MT soybeans to unknown destinations, 2023-2024 marketing year.

— NWS weather outlook: Much cooler, Fall-like temperatures and locally heavy rainfall for the West... ...Above average heat forecast from the Plains to the Great Lakes through Thursday... ...Chances for heavy rain and severe thunderstorms continue for the Southern Plains.

Items in Pro Farmer's First Thing Today include:

     • Grains mildly firmer overnight
     • Poland promises to safeguard grain market amid rising Ukraine tensions
     • Fed expected to pause

CONTINUING RESOLUTION (CR) & POSSIBLE GOV’T SHUTDOWN

— House GOP leadership fails to advance Pentagon spending bill due to five renegade Republicans. It was another setback Tuesday for House Republican leadership, this time for their effort to advance the Pentagon spending bill as five renegade GOP lawmakers voted against the rule, leading to its defeat. This incident reflects the ongoing challenges faced by House Republicans in finding consensus on funding the federal government, with the looming deadline of Sept. 30 for agencies to run out of money.

Earlier Tuesday, House Republicans had abandoned a procedural vote aimed at funding the gov’t for 30 days. Speaker Kevin McCarthy (R-Calif.) urged party members to convene and devise a plan that could gain approval across the entire Republican caucus.

The five renegade Republican representatives voting against the rule: Ken Buck (Colorado), Andy Biggs (Arizona), Ralph Norman (South Carolina), Dan Bishop (North Carolina), and Matt Rosendale (Montana). (Note: There are additional renegade Republicans such as Matt Gaetz (R-Fla.) who voted for the Pentagon measure.)

Efforts to coax Norman to change his vote went nowhere because he wants a commitment from McCarthy regarding a topline spending figure for fiscal year (FY) 2024, advocating for discretionary spending to be set at $1.47 trillion. Norman is a member of the important Rules Committee.

Rep. Mike Garcia (R-Calif.) railed against the five GOP renegades, accusing them by name of aiding the Chinese Communist Party and President Xi Jinping. Rep. Mike Simpson (R-Idaho), a top appropriator, complained that “we're being dragged around by five people, when 200 of us are in agreement.”

Now what? There are 11 days until a shutdown. And the House is out Monday for Yom Kippur. Some conjecture that GOP leadership will load up a stopgap spending bill with key GOP priorities, pass it, and hope for negotiations with Senate Democrats to keep the government funded or amend the bill and return it to the House. But even if that is the approach taken, it’s still not clear if McCarthy can get enough GOP votes as some of the Republican renegades may vote no on anything offered.

Bottom line: Some say the question is not if a gov’t shutdown occurs, it’s how long it will last and what it will take to rectify any such shutdown. It’s not even winter yet but the House GOP appears frozen at this juncture, unable to move on any option.

— White House warns of potential consequences as gov’t shutdown looms. The White House publicly addressed the potential consequences of a government shutdown, emphasizing the risks of a lapse in funding next month as infighting among House Republicans over spending raises the likelihood of such an event. The government's partial shutdown, if it occurs, could lead to disruptions at airports, delayed food-safety inspections, halted infrastructure projects, and military personnel working without pay.

White House officials privately express confidence that the public would hold Republicans accountable for any shutdown and plan to increase warnings about its consequences. Senate Minority Leader Mitch McConnell (R-Ky.) has also voiced concerns about the political repercussions of a shutdown, citing its negative impact on Republicans in the past.

The severity of the effects of a potential shutdown would depend on its duration, with a brief shutdown likely resulting in limited fallout. However, an extended shutdown could lead to significant disruptions in gov’t services and leave federal employees working without pay. The White House highlighted various consequences, including military and law enforcement personnel working without pay, potential delays in disaster-relief funding, and increased travel disruptions due to a shortage of air-traffic controllers and TSA officers.

The White House also pointed to potential delays in critical areas such as medical research, workplace and food-safety inspections, environmental protection efforts, and small business loans. Government agencies typically follow their own contingency plans in the event of a shutdown, determining which employees are essential and outlining the extent to which operations will continue.

RUSSIA/UKRAINE

— Polish president promises to safeguard grain market amid rising Ukraine tensions. Polish President Andrzej Duda pledged to protect Poland's grain market from an influx of Ukrainian grain, emphasizing the need for control over such imports. “We cannot allow that Ukrainian grain is sold on the Polish market without any control,” Duda said in a Bloomberg Television interview in New York on Tuesday. Duda expressed concerns about the impact on Polish citizens and urged Ukraine to refrain from public attacks amid a dispute that has strained the close ties between the two countries in their united stance against Russia's invasion of Ukraine.

Tensions have arisen recently, with Ukraine criticizing Poland's decision to impose a ban on grain imports in response to farmer protests over declining grain prices. Ukraine filed a complaint with the World Trade Organization regarding the restrictions.

Ukraine has proposed a mechanism to control exports of key crops to the European Union, seeking approval from the bloc for the initiative. If accepted, Ukrainian exporters will receive licenses to ship specified crops while ensuring volumes remain within agreed limits.

Observers say Poland's closure of its grain market to Ukrainian imports is driven by political considerations, particularly the ruling Law & Justice party's desire to maintain support from its rural voter base. The party is facing an election on Oct. 15 and is cautious not to alienate segments of its constituency. Poland has been a significant source of military aid for Ukraine and has taken in approximately two million refugees from Russia's invasion.

— Ukraine charts new grain export route amid Russian naval threat and trade disputes. In a bold move to secure export routes for its critical grain industry, Ukraine has taken two significant steps, sending a ship laden with wheat along a new Black Sea route in defiance of Russian naval aggression and challenging one of its key allies, Poland, over its stance on Ukrainian imports, the New York Times reports (link).

The ship in question, the Resilient Africa, carrying 3,000 metric tons of wheat, successfully crossed into Romanian waters on Tuesday evening after departing from the Ukrainian port of Chornomorsk more than 12 hours earlier. This move underscores the growing importance of establishing a new sea route as Ukraine faces renewed disputes with its grain-producing European Union neighbors regarding overland exports.

However, despite the Resilient Africa's apparent safe passage, experts caution that uncertainty remains over Ukraine's ability to rebuild its vital grain industry, which has been burdened by 19 months of conflict.

The vessel, sailing under the flag of Palau, marks the first grain ship to leave a Ukrainian Black Sea port since Moscow terminated a year-long deal that allowed Ukraine to export grain directly through waters dominated by Russia's Black Sea fleet to Turkey and the Bosporus.

Under the new route proposed by the Ukrainian government, ships will travel along the coast before entering Romanian and Bulgarian waters—both NATO member states. Ukraine's Infrastructure Minister, Oleksandr Kubrakov, described this corridor as "established by the Ukrainian Navy."

Nevertheless, the risks associated with this new export route are substantial. In July, Moscow issued a warning, stating that it would consider any commercial vessel approaching a Ukrainian port as a potential carrier of military cargo. In the following month, the Russian Navy fired warning shots at a cargo ship, boarding it at gunpoint for inspection. Since July, Russia has also targeted the Ukrainian port of Odesa and the country's Danube River ports, specifically aiming at grain facilities.

Moreover, the Black Sea itself has become a theater of conflict between Ukraine and Russia, with both sides launching attacks on military targets across vast stretches of water. The success of Ukraine's new export route may depend on the willingness of commercial shipping companies to risk their vessels in this volatile environment.

Besides these challenges, Ukraine has faced resistance from neighboring countries, including Poland, Hungary, and Slovakia, regarding overland grain exports. These nations argue that Ukrainian crops arriving by road and rail undercut their domestic producers. In response to their opposition, Ukraine filed a complaint with the World Trade Organization against the three countries.

The tensions have complicated Ukraine's relationship with Poland, one of its staunchest supporters. Poland's conservative governing party, Law and Justice, which leads in the polls ahead of upcoming elections, is seeking to balance support for Ukraine with protecting its farmers from competition with cheap Ukrainian grain.

Despite these obstacles, Ukraine remains committed to resolving the issue and has presented an action plan to control the export of specific agricultural products. In the face of Russian pressure on its export routes, Ukraine managed to export approximately five million tons of grain in July and August, similar to levels when the grain deal was in effect.

However, experts warn that Russia's actions have inflicted longer-term damage on Ukraine's agricultural sector. Fortunately, the dire consequences predicted by some, such as exacerbating a hunger crisis in various countries, have not fully materialized, thanks to the stability of global wheat supplies and prices. Russian wheat exports across the Black Sea have contributed to this stability, despite the initial spike in wheat prices at the start of the invasion.

— Russia raises grain export forecast. Russia’s ag minister says he expects the country to export 60 MMT of grain this year. Wheat will account for the bulk of that total, though he didn’t give a specific wheat export figure. He noted the country has harvested 123 MMT of grain out of an expected 130 MMT.

— Ukrainian President Volodymyr Zelenskyy delivered a powerful speech at the U.N. General Assembly, his first in-person address since the 2022 Russian invasion of Ukraine. Zelenskyy called for global unity against Russian aggression and received enthusiastic applause when he began. In his 15-minute speech, he accused Russian leaders of engaging in acts of terrorism and genocide, with a particular emphasis on the removal of Ukrainian children from their country. He accused Russia of weaponizing food and energy prices against the entire world.

Zelenskyy appeared on CNN and made a plea to former President Donald Trump to share any potential peace plans he claims to have. Trump, who is the leading contender for the 2024 Republican presidential nomination, has asserted that he could negotiate a deal between Zelenskyy and Russian President Vladimir Putin to bring an end to the conflict in Ukraine within 24 hours.

POLICY UPDATE

— Stabenow and former Senator Chambliss discuss key farm bill issues. Senate Ag Committee Chairwoman Debbie Stabenow (D-Mich.) and former Sen. Saxby Chambliss (R-Ga.), who chaired the committee when he was in the Senate, spoke Tuesday at a Bipartisan Policy Center event on the farm bill.

In remarks, Stabenow expressed concerns about a potential government shutdown within the next two weeks, describing it as "self-inflicted." She also indicated her aim for the Senate is to pass the farm bill in December, suggesting that she doesn't have much confidence in the House's ability to pass a farm bill soon. While the House typically moves first on the farm bill, current expectations are that the less politically fractured Senate will take the lead this time. Stabenow noted the ongoing struggle to clear government spending measures in the House gives her concern about how it will be able to move the measure. “Watching it from the outside, it makes me very nervous.”

Chambliss asked Stabenow whether she believes there is sufficient farm bill baseline funding to tackle priorities including ensuring nutrition assistance keeps pace with higher food prices and updating farm risk management programs to help farmers impacted by rising production costs. “Do we have all the baseline to deal with all the needs? No, I will just start there,” Stabenow said. “I'm looking under every rock and I mean, literally every possible thing you can think of,” she said regarding finding new funding. Stabenow acknowledged the need for bipartisan support to secure resources for risk management tools and address the rising costs of food products and input costs for farmers, ranchers, and forest landowners.

“We have to do the doable, and we still have folks talking about things that are going to cost more votes than they’re going to get,” Stabenow said. She appeared to be referencing GOP calls to significantly increase boost reference prices and other risk management tools for farmers as part of the farm bill. Stabenow has repeatedly suggested there’s no money available to significantly boost those programs, but she’s looking for it. She said lawmakers “need to make crop insurance more affordable” in the farm bill. As for the 20 crops that benefit from reference prices, Stabenow said the committee needs to do “what we can do there, more there also.” Though, she didn’t make any promises.

Stabenow highlighted the challenges of finding the necessary funding for various priorities, such as research and development and the campaign to transition Puerto Rico from a food assistance block grant to the regular Supplemental Nutrition Assistance Program (SNAP). She emphasized the need for a significant increase in agricultural research, likening it to a "moonshot," but expressed concerns about the availability of resources to support such initiatives. Stabenow suggested she might be able to tap funding from the bipartisan CHIPS and Science Act for funds for ag research.

The conversation delved into the intricacies of farm bill funding, including the allocation of $20 billion from the Inflation Reduction Act for climate-smart conservation. Sen. Stabenow expressed her intention to maintain the IRA funds for climate-focused practices and boost the farm bill's baseline with these resources, keeping the climate crisis at the forefront of agricultural policy, but only if it is used for climate-related conservation programs. This reflects her commitment to addressing climate change through agricultural practices. "The number one threat to our farmers is the climate crisis," she said. "I will not support taking those dollars and putting it in another title."

She also emphasized the need to preserve flexibility in Commodity Credit Corporation budget allocation and stressed the significance of incentives for commodities grown with climate-smart methods.

Stabenow and Chambliss discussed the challenges of funding conservation programs with high demand and oversubscription, proposing streamlined application processes to improve efficiency and support for beginning farmers. Chambliss asked how lawmakers were considering ways to better utilize the IRA funding to address the issue of oversubscription in Farm Bill conservation programs. “We have the dollars, so now we're talking about how you cut the application process in half, how do you streamline it,” Stabenow said. “That's our biggest concern. Senator Boozman and I both talk about how one of the best things we could do is make sure we're cutting the paperwork.”

Stabenow noted the recent request she and Senate Ag Ranking Member John Boozman (R-Ark.) made to USDA Secretary Tom Vilsack, asking him to deploy excess Commodity Credit Corporation (CCC) funds — which are not part of the Farm Bill baseline — to boost resources for international food aid and trade promotion. “We're hopeful we're going to get a response that is going to allow for robust trade and market assistance, which is what we need,” Stabenow said, noting major commodity groups have been pushing lawmakers to double funding for USDA trade promotion programs after more than a decade of no increases. “I think we're going to be able to create something that will pretty much do that for the next five years, and so we can do that without taking away from the baseline,” she said regarding tapping CCC for trade promotion efforts. (Note: Reports continue to indicate USDA has cleared $2.5 billion in CCC funding for export promotion and food aid.)

The discussion extended to research programs, with Sen. Stabenow advocating for a significant increase in agricultural research funding to address pressing global challenges, especially in combating climate change and ensuring food security. Stabenow specifically mentioned the Foundation for Food and Agriculture Research (FFAR), created by Stabenow and former Senate Ag Chair Pat Roberts (R-Kan.) under the 2014 Farm Bill. While funding constraints limit what additional ag research resources can be added to the next farm bill, Stabenow said that she is eyeing options outside of the farm bill that could lend additional support and not cut into the baseline.

The conversation touched on nutrition quality aspects of programs like SNAP (Supplemental Nutrition Assistance Program) and efforts to promote healthier eating through initiatives like Double Up Bucks and prescription produce programs.

Stabenow expressed her support for Puerto Rico's inclusion in the SNAP program but acknowledged resource limitations and political challenges in expanding SNAP at the current time.

Of note: In separate breakfast-time appearances, Thompson and Stabenow said action on the farm bill was delayed by a search for ways to increase reference prices and expand crop insurance.

— Thompson: Awaiting CBO scores on farm bill programs. House Agriculture Committee Chairman Glenn "GT" Thompson (R-Pa.) addressed concerns and priorities related to the 2023 Farm Bill at an Axios event on Tuesday. Thompson highlighted that the committee is still waiting for Congressional Budget Office (CBO) scores for certain farm bill programs. He commended the CBO's efforts in analyzing the committee's proposals.

Thompson stressed the importance of recognizing the unique deadlines associated with the farm bill. While it officially expires on Sept. 30, he referred to Dec. 31 as the "functional deadline" for most aspects of the bill. For certain crop-related matters, the deadlines extend into the following year due to the growing season. Thompson emphasized the need to prevent significant disruptions to programs that impact American farmers, especially as some elements face a sudden halt on Oct. 1. Among the sectors that would see the biggest impacts from a reversion to 1930s and 1940s policies is dairy, dubbed the “dairy cliff.” The law would require USDA to purchase milk to more than double milk prices from their current level, dramatically increasing retail prices. Link to CRS report. For that reason, along with impacts for other commodities, in the event of delays into 2024, a farm bill extension is almost a certainty.

Thompson expressed confidence in the prospects of passing a bipartisan farm bill, highlighting unprecedented support from leadership. He encouraged support for the bill and drew a sharp contrast with the farm bills of the 1980s, which he characterized as hastily distributing funds in the hope of resolving issues.

Thompson underscored the significance of the next farm bill, describing it as founded on public-private partnerships and essential for national security. He envisioned it not only serving farmers through 2028 but also becoming a platform for the future, emphasizing that American agriculture thrives on "science, technology, and innovation."

Addressing his priorities for the farm bill, Thompson highlighted the need to address rising input costs, update farm safety net reference prices, boost efforts to sequester carbon and promote U.S. ag competitiveness.

While praising the appointments of Doug McKalip and Alexis Taylor to key trade positions, Thompson criticized the Biden administration's perceived sluggishness in international trade matters. He urged the administration to continue pursuing trade agreements with Kenya and the United Kingdom.

Thompson also noted that programs like the Foreign Market Development and Market Access Program, aimed at supporting farm groups in promoting trade, continue to receive funding at their original levels.

He also raised concerns about the Environmental Protection Agency's treatment of crop protection tools, suggesting that scientists have been sidelined and these tools demonized.

Will the battle over a stopgap spending measure weigh on the farm bill? A shutdown or a short-term CR could both impact the timeline of the farm bill, according to Thompson. “It just keeps pushing us, which is crazy,” Thompson told reporters. “A shutdown is always irresponsible.” He said November is now a more accurate estimate of when a farm bill could be considered. Thompson added that the 8.1% cut to USDA in the proposed CR didn’t rattle him, because “at the end of the day I know the Senate is not going to accept that … then we’re going to come together” to work out a compromise bill.

— Vilsack emphasizes climate-smart focus for farm bill's conservation funds. USDA Secretary Tom Vilsack discussed his hopes for the upcoming farm bill and the allocation of $20 billion in conservation funding from the Inflation Reduction Act (IRA/Climate Bill) during an Axios event on Tuesday. Vilsack wants the farm bill to prioritize climate-smart practices and enable the continued use of the Commodity Credit Corporation budget authority to support climate-smart initiatives.

While confirming that a farm bill is forthcoming, Vilsack emphasized that the nature of the bill remains uncertain, with the focus on transitioning to the "next iteration" of farm policy.

Some Republican proposals have suggested relocating the $20 billion designated for climate-smart conservation projects from the Inflation Reduction Act to the farm bill. This could involve using the funds to expanding their use to encompass a wider array of conservation projects.

Vilsack stressed that preserving the IRA funds for climate-smart practices and retaining his flexibility to make decisions regarding the Commodity Credit Corporation are vital elements of a forward-looking bill. He argued that commodities cultivated or raised using climate-smart methods should carry a premium or receive market incentives, pointing out that numerous farmers have expressed their willingness to embrace climate-smart practices.

USDA issued a release (link) outlining its efforts to distribute the IRA’s climate-smart conservation funds to farmers and organizations. The Congressional Budget Office has raised questions about USDA's capacity to implement this program effectively.

“One key element is maintaining the funding and resources for climate-smart practices,” said Vilsack. As an example, he pointed to the “remarkable” response by farmers to the $850 million available this year in climate mitigation funding. “We got three-and-a-half times the amount of demand that we have money… It’s very clear that farmers are interested and anxious to use these increased resources to do a better job in terms of allowing them to mitigate and adapt to a changing climate.”

Vilsack revealed USDA has received more than $2.5 billion in requests for various conservation program funding. “The demand is extraordinary,” Vilsack said.

CHINA UPDATE

— China leaves benchmark lending rates unchanged. China kept benchmark lending rates unchanged, as expected. The one-year loan prime rate (LPR) was kept at 3.45%, while the five-year LPR was unchanged at 4.20%. Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.

TRADE POLICY

— China appeals WTO decision rejecting tariffs on $2.4 billion of U.S. products. China lodged an appeal with the World Trade Organization (WTO) against a recent decision that rejected the country's tariffs on $2.4 billion worth of U.S. products. The Ministry of Commerce in China stated that it believes the WTO panel's ruling contained legal errors and that the appeal is aimed at safeguarding its rights and interests. The WTO panel had ruled in favor of the U.S. last month, finding that China violated its trade commitments when it imposed these tariffs in response to former President Donald Trump's steel and aluminum duties. The panel agreed with the U.S.’ argument that China's tariffs breached its most-favored-nation status and other trade concessions made when it joined the WTO.

China contends that its tariffs were implemented as a response to unilateral and protectionist measures taken by the U.S. during the early stages of Trump's trade war, which included imposing 25% tariffs on global steel imports and 10% tariffs on aluminum imports.

Of note: A Beijing appeal effectively acts as a veto since the WTO appellate body has not been operational since 2019.

ENERGY & CLIMATE CHANGE

— EPA urged to strengthen oversight of RFS program following auditor's report. The Environmental Protection Agency (EPA) has been called upon to enhance its oversight of the Renewable Fuel Standard (RFS) program to prevent fraudulent activities and circumvention of program rules, according to a report from the EPA Office of Inspector General (OIG). The report (link) highlighted vulnerabilities within the program, including the creation of 339 million counterfeit Renewable Identification Numbers (RINs) since the inception of the RFS in 2005, with a total estimated value of approximately $87 million.

The OIG identified several weaknesses in the RFS program, including the allowance for companies to submit their transactions up to 30 days after they occur, the generation of surplus ID numbers by companies, insufficient verification of renewable fuel transactions among firms, and a lack of assurance regarding the independence of human auditors. The OIG stressed that until these issues are effectively addressed, the EPA cannot reasonably ensure that the RFS program is achieving its objectives of reducing greenhouse gas emissions, expanding the renewable fuels sector, and decreasing dependence on imported oil.

The OIG established four dummy companies capable of purchasing, selling, and transferring RINs, underscoring the urgency of addressing the identified weaknesses. The EPA has acknowledged and agreed with all of the OIG's findings.

— Yellen advocates climate guidelines for banks at U.N. General Assembly. Treasury Secretary Janet Yellen is championing guidelines for banks that make commitments to achieve net-zero emissions, emphasizing the urgency of addressing climate change in the wake of recent devastating natural disasters. Yellen's initiative includes nine principles aimed at promoting best practices for lenders pursuing net-zero goals, such as employing clear metrics, ensuring transparency in progress reporting, and providing financing to support clients in transitioning to clean energy.

Highlighting economic losses of nearly $200 billion due to natural disasters this year, Yellen stressed the immediate need for action. She also announced pledges totaling $340 million from nonprofits, including the Bezos Earth Fund and Bloomberg Philanthropies, to facilitate the implementation of these guidelines. Additionally, Yellen held discussions with top financial executives, including Larry Fink of BlackRock, to address these climate initiatives.

Yellen's commitment to climate action dates back to the 1990s when she began studying the economic impacts of climate change during her tenure as the chair of Bill Clinton's Council of Economic Advisers. While some praise her dedication, critics argue that her actions have not matched her rhetoric, despite declaring climate change an "existential threat" two years ago during her confirmation hearing. Joe Thwaites of the Natural Resources Defense Council emphasized the need for concrete actions to align with Yellen's climate declarations.

In related climate news, the U.N. is hosting the Climate Ambition Summit, featuring speakers exclusively from nations actively working to limit fossil fuel production, as opposed to solely focusing on reducing greenhouse gas emissions. Notably, Ursula von der Leyen, President of the European Commission, will speak at the summit, while John Kerry, the U.S. climate envoy, is not scheduled to participate.

OTHER ITEMS OF NOTE

— European Commission proposes 10-year renewal of glyphosate approval, awaits EU member country votes. The European Commission put forward a proposal to extend the approval for glyphosate for a period of 10 years. This recommendation from the Commission will undergo a voting process involving the 27 European Union (EU) member countries. To be adopted, the measure requires the support of at least 15 members, constituting a qualified majority representing a minimum of 65% of the EU's population.

In July, the Commission indicated its endorsement for glyphosate's approval and reauthorization for use within the EU, based on a risk assessment conducted by the European Food Safety Authority. The assessment did not identify any critical areas of concern associated with glyphosate use. The forthcoming recommendation is slated for discussion among member countries on Friday, with the final vote scheduled for Oct. 13.

— Calendar of events today include:

Wednesday, Sept. 20

Government shutdown. Bipartisan Policy Center (virtual discussion on "Can Congress Prevent a Government Shutdown?"
G20 summit review. Axios discussion on "takeaways from the G20 summit, the road ahead for the 2024 election, international economic policy and other big news stories of the day."
AI issues. U.S. Chamber of Commerce Global Artificial Intelligence (AI) Forum.
Hispanic caucus meeting. Congressional Hispanic Caucus Institute "Congressional Hispanic Caucus Institute Conference and Gala.”
Chemical value chain. U.S. Chamber of Commerce Chemistry Solutions Summit on "the most important issues and innovation within the chemical value chain."
Capital and businesses. Punchbowl News discussion on "Capital and American Business."
Blinken, USAID director comments. Secretary of State Antony J. Blinken and U.S. Agency for International Development Director Samantha Power deliver remarks on "Democracy Delivers."
DOJ oversight. House Judiciary Committee hearing on "Oversight of the U.S. Department of Justice." Attorney General Merrick Garland testifies.
DOT oversight. House Transportation and Infrastructure Committee hearing on "Oversight of the Department of Transportation's Policies and Programs." Transportation Secretary Pete Buttigieg testifies.
CEQ and federal contracting. House Science, Space and Technology Investigations and Oversight Subcommittee hearing on "A Bar Too High: Concerns with CEQ's (Council on Environmental Quality) Proposed Regulatory Hurdle for Federal Contracting."
Hydropower. House Energy and Commerce Energy, Climate, and Grid Security Subcommittee hearing on "American Hydropower: Unleashing Reliable, Renewable, Clean Power Across the U.S."
FTC nominees. Senate Commerce, Science and Transportation Committee hearing on the nominations of Rebecca Slaughter to be a commissioner of the Federal Trade Commission; Melissa Holyoak to be a commissioner of the Federal Trade Commission; Andrew Ferguson to be a commissioner of the Federal Trade Commission; and Douglas Dziak to be a commissioner of the Consumer Product Safety Commission.
AI and financial services. Senate Banking, Housing and Urban Affairs Committee hearing on "Artificial Intelligence in Financial Services."
U.S. southern border. House Homeland Security Committee hearing on "The Financial Costs of Mayorkas' Open Border."
FEC oversight. House Administration Committee hearing on "Oversight of the Federal Election Commission (FEC)." FEC Chair Dara Lindenbaum, Vice Chair Sean Cooksey, and FEC Commissioners Shana Broussard, Allen Dickerson, James Trainor III and FEC Inspector General Christopher Skinner testify.
Supply chains and China. House Energy and Commerce Innovation, Data, and Commerce Subcommittee hearing on "Mapping America's Supply Chains: Solutions to Unleash Innovation, Boost Economic Resilience, and Beat China."
Trade and national security. Business Executives for National Security virtual discussion on "Trade — National Security Developments to Counter a Changing World Order."
Technology and climate change. Washington Post Live virtual discussion on "How technology is accelerating the effort to find climate change solutions."
Supreme Court preview. Heritage Foundation discussion on "Supreme Court Preview of the 2023-2024 Term.”
CPTPP and the Indo-Pacific. Center for Strategic and International Studies virtual discussion on "Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Future of Trade in the Indo-Pacific."
GSP and China. House Ways and Means Trade Subcommittee Committee hearing on "Reforming the Generalized System of Preferences to Safeguard US Supply Chains and Combat China."
Jobs and clean energy. Joint Economic Committee hearing on "Growing the Economy of the Future: Job Training for the Clean Energy Transition."
Drought impacts on water. Senate Energy and Natural Resources Water and Power Subcommittee hearing on "Drought Impacts on Drinking Water Access and Water Availability."
Cybersecurity and China. House Judiciary Courts, Intellectual Property, and the Internet Subcommittee hearing on "IP and Strategic Competition with China: Part III - IP Theft, Cybersecurity, and AI."
Economic reports. FOMC Meeting Conclusion | Fed Chair press conference
Energy reports. EIA Petroleum Status Report | Weekly Ethanol Production | Genscape weekly crude inventory report | Wood Mackenzie Hydrogen Conference, London | WTI October futures expire.
USDA reports. ERS: Vegetables and Pulses Data | Fruit & Tree Nut Data NASS: Broiler Hatchery

KEY LINKS

Crude Awakening: Rising Oil Prices Complicate Fed’s Decisions Later This Year

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